Audit Procedure for Cash Sales Operations for McDonald's - Example

Table of Contents Introduction 2 Section A: Planning 2 Section B: Testing 7 Section C: Discussion & Learning 10 Conclusion 12 References 13 Introduction This paper looks at evaluating an audit procedure for cash sales process for McDonalds which will look at highlighting the different factors and mechanism through which business carried out different functions associated with order booking, dispatching of order, confirmation from customers regarding receipt of order, receiving payments from customers and posting the necessary entries to ensure that all the cash which is outstanding in the market is easily collected. The report will further be divided into three section where the first section which is planning will deal with the entire sales process and steps that have to be in place to reduce the chances of misappropriation of funds; will be followed by section two which will cover the testing phase and compare the actual result with the achieved results so that different variations can be found out; and lastly the final section will be the discussion and reflection section which will highlight the different changes which have to be done along with the weakness and strengths of the audit process and the mechanism which will help to improve the overall relevance of decision making. This will thereby lead towards better results in the future and will provide a framework through which better decisions will be taken at all level and better planning will be achieved. Section A: Planning Process This section will look an analyzing the audit procedure which has been developed by McDonalds and will start from customer placing an order till the final payment is received so that the entire process of cash collection can be observed and based on it the audit process can be determined. This will thereby include the different needs and requirements of the planning process and will provide the overall framework through which effective decisions will be taken Document Controls (objective) Comments Customer order The process starts when the customer places the order. The order is placed by the customers by either visiting the stores, or over phone, internet or by mail. The customer places the order based on the different needs and requirements Sales order Approval from the sales department is taken and the then the order is processed either for being delivered at their footsteps or being picked by the customer . Sales order need to receive the required approval from the concerned authority so that processing of order can be done. This will also look into the aspect of payments and determine that the orders which is to be shipped is as per the orders which has been given by person. Shipping document (bill of lading) Checking the quantity of goods to be dispatched so as to ensure accuracy Ensure completeness of every aspect so that goods gets delivered on time The goods which needs to be provided to the customer at their doorsteps are packed and parceled so that customers can avail the service is proper way Ensure all the required information pertaining to goods like bills, packaging and other is in proper order Sales invoice Matches with the goods which have been invoiced (occurrence). Prices and quantity are properly checked and is correct (accuracy). Sales invoice is the main document as it determines the goods which have been sold. Ensuring that all information are provided in the sequential order ensures completeness and provides maximum information through which correct sales occur and money is collected from the market. Sales journal The different postings to be made are identified (posting and summarization). Postings are made after the goods are sent to the customer (timeliness). Sales invoice gets recorded in the sales journal where the computerized process ensures that the positing are made at the correct areas and at the time the goods are billed and shipped thereby ensuring that the entries are posted on time and is complete at the appropriate juncture Credit Memo Approval is gathered from the person responsible to delivering the goods (occurrence). In case goods are returned the invoice and other details are noticed and recorded (occurrence). The different documents are verified and if sales occur entries based on it are done and if returned then sales return entry is made. The overall phenomenon looks as ensuring that the material information which is recorded is correct and provides correct information to the user. Document Controls (objective) Comments Cash receipt prelist The cash receipt list is prepared by an accountant based on the money which is received from different customers. The different assistant helps to comply with the work but the accountant has a major role at this juncture This is the start of cash receipt cycle where cash is recorded as they enter the business All entries which have cash involved is recorded so that misappropriation of funds can be reduced and the checks developed ensures limited risk for the business The different mode of payments which are received like cash, cheques and others are correctly recorded at the appropriate time. Different control measures are also used to ensure that the payments is received on time and recorded correctly. Remittance advice The different documents based on which remittance is received are recorded in the correct manner (completeness and accuracy). Te remittance advice is correctly recorded as the occurrence of different devices ensures better recognition of different money The cash receipt which is made is done on a daily basis to ensure that correct information is provided at the correct time (timeliness) Correct remittance form needs to be used and while looking to post the different remittance correct advice and information needs to be used for maximum and corrective recording Cash receipts journal The different cash receipts are posted at the appropriate time (P&S). Cash is recorded when the cash is received (timeliness) The cash receipt journals records the cash which is collected and the entries are posted as and when they occur so that the actual cash balance can be correctly found out Accounts receivable subledger Subledgers of individual customers are created and entries are posted so that correct outstanding information for each party can be found out The accounts receivable subledger acts as an interface between the cash which is collected and the outstanding balance thereby highlighting the manner in which business works. Ensuring proper reconcillation of the ledger is important so that correct and complete information can be provided and collected Bad debt charge-off Needs to be accounted as it occurs and correct entries based on it should be made The organization needs to ensure that correct entries are recorded at the correct time. This has to be verified and complete recording should be free from bias so that corrective information is recorded and provided. McDonalds has thereby developed their cash collection and sales cycle based on the manner in which the business will be able to ensure better cash receipts. This has created and provided an opportunity where the business along with it needs to develop a process of auditing which will ensure that correct information is recorded and the process looks at justifying the manner in which different business decisions are made (Hodorogel, 2009). Section B: Testing This phase involves checking the manner in which different cash receipts are received with the actual manner in which different information is recorded. The process looks as matching the actual results with the determined results so that the process of auditing can achieved the determined objectives and the business based in it is able to ensure that no misappropriation of funds takes place. This section will thereby look to evaluate the different measures which are identified and the results which have been achieved based on it. Document Results Witnessed Customer order McDonalds starts their process when the customer places the order. The order is placed by the customers by either visiting the stores, or over phone, internet or by mail. Sales order It was evident that McDonalds while looking to process the sales order ensures confirmation from the required authority. This helps them to plan the goods which will be required and the manner in which different entries need to be posted Shipping document (bill of lading) The order bill is used as a shipping document as McDonalds provides the goods to the customers nearby and used it as a mechanism to attract and retain customers Sales invoice It was witnessed that sales invoice was the main document as it determines the goods which have been sold. The different information regarding to the sales are recorded in the correct books and at the correct time based on the needs and requirements of the customers Sales journal It was witnessed that the sales invoice gets recorded in the sales journal automatically and the managers don’t have to get involved in the process of recording the sales. In addition to it the sales are recorded as and when they take place Credit Memo McDonalds on this regard has fewer debt which thereby reduces the pressure and ensures that the different documents are verified and if sales occur entries based on it are done and if returned then sales return entry is made. Document Results Witnessed Cash receipt prelist It was witnessed that the start of cash receipts cycle where cash is recorded as they enter the business. All entries which have cash involved is recorded so that misappropriation of funds can be reduced and the checks developed ensures limited risk for the business. In addition to it the different mode of payments which are received like cash, cheques and others are correctly recorded at the appropriate time. This thereby ensures that the process of cash receipt in done as they occur and highlight the manner in which different debt is outstanding (Drever, 2006) Remittance advice McDonalds aim towards using correct remittance form so that the different entries are recorded but this is done on a weekly basis instead of a daily basis thereby differentiating the manner in which entries are recorded (Cosh & Hughes, 2000). Cash receipts journal McDonalds record the sash receipt as and when they occur and entries are posted at the correct ledger so that it reflects the correct cash status of the business at all times. Accounts receivable subledger McDonalds have a limited amount of accounts receivable subledger as the business has little outstanding and most transaction takes place on cash. Ensuring proper reconcillation of the ledger is important so that correct and complete information can be provided and collected Bad debt charge-off McDonalds hardly has any bad debts but the business still continues to ensure that scope is kept so that timely adjustments can be made so that the business reflects the correct cash position and ensures proper reconciliation of the sales The overall phenomenon shows that McDonalds has been able to develop their audit policies in line with the business needs and ensures that the information provided is correct. This has reduced the chances of misusing the funds and have created a process through which the different information which is provided is correct and ensures that the overall relevance of recoding sales and cash improves and the business is able to identify the correct liquidity position. Section C: Discussion & Learning The manner in which McDonalds have grown their business and the manner in which cash is recorded shows that there is no misappropriation of funds. Recording the different transactions at the appropriate time ensures that the correct cash position can be found out at the appropriate moment. The process of auditing being carried out by McDonalds ensures effectiveness in recording all the transactions which has been carried out. This will thereby help to reveal the actual value of the cash position and ensure that all entries are recorded at the correct time. The mechanism which McDonalds have further used has provided the required freedom and liberty through which the recording of different transaction becomes possible. The process which McDonalds uses ensures that the process checks the different steps which are involved in recording the transactions. The process of auditing ensures that different steps are checked and verified so that no scope of any leakage or manipulation becomes possible (Binks, Ennew & Reed, 2002). This will thereby help to create the required path and develop the momentum through which the business proceedings are improved. The process carrying out the audit process further looks at ensuring that the actual cash receipt are recorded at the correct time which will thereby help to reveal the actual cash position at the appropriate time. The process of also recording the cash and non cash receipt will provide correct and complete information regarding the different transaction takes place. This will thereby help to reflect the manner in which the business has being able to highlight the correct liquidity position and has been able to create the required scope through which the business has been able to gain momentum (Bannock & Doran, 2001). This has thereby provided correct information regarding the different transaction which takes place and has thereby maximized the results which are achieved based on it. This has thereby created the required scope and steps through which audit process is better carried out. The overall mechanism which has identified ensures that the process of auditing is carried out in each step and has thereby ensured that the overall results which is achieved helps to ensure that all entries are correct. This will also help the business with taxes and other legal matters and will thereby improve the overall relevance of decision making. I feel that McDonalds by having an audit process for each step has been able to develop the required process through which business effectiveness can be established. This will help to improve the mechanism of decision making and will thereby ensure that the business is able to verify the different entries and ensure that no misappropriation of funds takes place. The current strategy which McDonalds has adopted with this regard has looked at ensuring that the overall mechanism improves better decision making and ensures that the business is able to provide complete and correct information. Conclusion This paper which evaluates an audit procedure for cash sales process for McDonalds highlights the different factors and mechanism through which business carried out different functions associated with order booking, dispatching of order, confirmation from customers regarding receipt of order, receiving payments from customers and posting the necessary entries to ensure that all the cash which is outstanding in the market is easily collected. The report is divided into three section where the first section which is planning will deal with the entire sales process and steps that have to be in place to reduce the chances of misappropriation of funds; will be followed by section two which will cover the testing phase and compare the actual result with the achieved results so that different variations can be found out; and lastly the final section will be the discussion and reflection section which will highlight the different changes which have to be done along with the weakness and strengths of the audit process and the mechanism which will help to improve the overall relevance of decision making. This will thereby lead towards better results in the future and will provide a framework through which better decisions will be taken at all level and better planning will be achieved. References Bannock, G., & Doran, A. (2001). Business Banking in 1990s: A New Era of Competition. London: Lafferty Group Binks, M., Ennew, C., & Reed, G. (2002). Information Asymmetries and the Provision of Finance to Small firms. International Small Business Journal, 11, 35-36 Cosh, A., & Hughes, A. (2000). British enterprise in transition: growth innovation and public policy in the small and medium sizes enterprise sector 1994-1999. University of Cambridge, Cambridge Carey, D., & Flynn, A. (2005). Is bank finance the Achilles’ heel of Irish SMEs? Journal of European Industrial Training, 29(9), 712-729 Drever, M. F. (2006). Determinants of Liquidity for Australian Small and Medium-Sized Enterprises (SMEs). University of New England, Armidale Hodorogel, R. G. (2009). The Economic Crisis and its Effects on SMEs. Theoretical & Applied Economics, 79-88 Read More